Managerial accounting is for internal use in order to inform decisions, unlike corporate accounting, which is for external use (investors, etc.).
You track fixed and variable costs separately and don’t unitize them as they are fundamentally different. $10 rent is fixed, whereas the more lemonade you sell, the more the costs (and profit) increase.
CVP analysis sounds fancy, but it’s simple. You simply take what your sales price is, subtract the per-unit cost, and then multiply it by the volume you anticipate selling. This helps you understand how changes in cost will affect operating and net income.
“Contribution margin” sounds fancy too, but it’s just what you have left over per unit after subtracting the cost to “contribute” to paying your fixed cost (in this case, the sweet lemonade stand).
So, we sell our lemonade at $1. Sugar and the lemons cost .75 per cup. So we have a .25 profit that can “contribute” to paying our $10 fixed cost for rent.
Here is where it gets cool. You are planning out your business and you think, “Gee, my rent costs $10, my lemonade sells for $1, and I make a .25 profit. How many cups do I need to sell in order to cover rent?”
Sweet! Now you’re movin’. If you sold $160 worth of lemonade, your variable cost (cost per unit multiplied by the number sold) would be $120 (.75x160). Apply the remainder ($40 profit) to your fixed cost and you just made a $30 profit. That’s how it’s done!
Activity Based Costing is important in understanding the overhead costs that happen in the normal course of business. Analyzing these will help you know which activities are worth continuing by surfacing what they really cost.
The Management Process is fairly straightforward. Planning, Controlling, and Evaluating will help inform your decisions.